The Manufacturers Association of Nigeria (MAN) has expressed worry over the plans by the Nigeria Customs Service (NCS) to re-introduce the 4% Free-on-Board (FoB) levy, stressing that it will have a catastrophic impact on the manufacturing sector and heighten smuggling.
According to the association, the nation’s entire business community and Nigerian citizens will suffer from the new development which it described as “an unfortunate and retrogressive one” to increase inflation and production costs.
While pointing out that the extensive stakeholder engagement promised has not been inclusive and not taken into consideration the affected stakeholders, precisely manufacturers, the group opined that the overwhelming opinion of the stakeholder engagement would have dissuaded the Service from implementing the levy and proffered a more progressive and sustainable option for increased revenue for the NCS and government.
“If implemented, this will be an additional burden to the 1% Comprehensive Import Supervision Scheme (CISS) fee being paid by its members at a time that all government agencies should be seeking ways to de-escalate cost of doing business in Nigeria, as it is being done in other climes and economies,” the group said.
According to the Director General of MAN, Segun Ajayi-Kadir, it is equally worrisome that this is coming at a time when there is still a looming danger of the unwarranted 15% hike in port charges.
His words: “Our members are struggling with the astronomical increase in the effective import duty calculations rate. and contending with unprecedented rise in the cost of energy.
“We had expected that the NCS would ultimately rescind the move to introduce the evidently unpopular and ill-timed levy. We didn’t expect to read on the pages of newspapers that the levy will be reintroduced, even before the promised wide consultation with stakeholders like MAN and other private sector organizations. We admonish that the decision should be put away before it worsens and degenerates into an economic quagmire.”
Ajayi-Kadir reiterated that what was needed at this time was the prioritization of improved trade facilitation that would mitigate the prevailing constraints militating against the optimum performance of the productive sector.
The group lamented the already high cost of importation due to the prevailing exchange rate used in calculating the customs duty, adding that the cost will further escalate.
“This is evident in the cost which had earlier jumped by over 118 percent from N2.07 trillion in the first nine months of 2023 to N4.53trillion in the same period of 2024. The levy will cause heavy disruption in supply chain, trigger raw materials stock-out in many manufacturing concerns, inflict higher cost of demurrage, further increase the huge volume of unsold inventories and worsen the competitiveness of Nigerian manufacturers,” the group argued.
While observing that the levy is coming at a time when the headline inflation has hit a historic record of 34.8 percent in nearly three decades and majority of Nigerians are struggling, MAN said the impact on the cost of locally produced items will be instant and far reaching.
It also observed that the new levy contradicts the principles of the ongoing Fiscal Policy and Tax Reforms and the spirit behind the tax bills currently being considered by the National Assembly.
“As an addition to the existing 1% CISS fee, extant duties and other cargo clearance charges, the new Customs Operations levy will increase import transaction costs, compound the already high cost of doing business significantly.
“The re-introduction of the levy is an additional incentive to smuggling, trade diversion, under declaration of duty and other trade infractions that has bedeviled our country, stretched the capacity of our Customs Service and undermined the revenue profile of the country.
“It will jeopardize the plan of the Federal Government to boost forex earnings through non-oil export, as many manufacturing exporters rely on imports for vital inputs and machines that are not available locally,” the group posited.
